Long-Run Risks and Financial Markets

34 Pages Posted: 3 Jul 2007 Last revised: 24 Jul 2010

Date Written: June 2007

Abstract

The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.

Suggested Citation

Bansal, Ravi, Long-Run Risks and Financial Markets (June 2007). NBER Working Paper No. w13196, Available at SSRN: https://ssrn.com/abstract=997552

Ravi Bansal (Contact Author)

Duke University and NBER ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7758 (Phone)
919-660-8038 (Fax)

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